EKA Noodles secures another reprieve from winding-up action

The EKA-brand rice vermicelli products made by EKA Noodles Bhd's unit Kilang Bihun Bersatu Sdn Bhd in Kuala Ketil, Kedah. (Pic taken by Hafidz Mahpar for Star Online)

KUALA LUMPUR: The High Court has extended by another three months an order restraining scheme creditors from further proceedings or actions against EKA Noodles Bhd and its eight subsidiaries starting March 28.

In a filing with Bursa Malaysia on Tuesday, the Practice Note 17 company said the Penang High Court had directed members of the EKA group to hold a meeting with the creditors within 180 days pursuant to Section 366 of the Companies Act 2016 to consider a proposed scheme of arrangement and compromise.

Under the Act, the compromise or arrangement will be binding if it is agreed by a majority of 75% of the total value of creditors or class of creditors.

The High Court has previously extended the 90-day restraining order against EKA’s creditors dated Sept 9, 2016, following its exiry on Dec 7, 2016.

Under the Companies Act, the court may extend a restraining order for up to nine additional months to enable the company and its creditors to formalise and approve the scheme of compromise or arrangement.

EKA had announced in August last year that it became an affected listed issuer, as its shareholders’ equity on a consolidated basis was 25% or less of the company’s issued and paid-up capital and such shareholders’ equity was less than RM40mil in its unaudited interim financial results for the second quarter ended June 30, 2016.

As a result, the EKA group was unable to meet its repayment obligations and applied for a court order to facilitate its meeting with its creditors to approve a proposed scheme of arrangement and compromise.

The EKA group has ceased its manufacturing activities from Jan 18 and is looking to sell its assets to settle the liabilities of its rice and sago stick (vermicelli) manufacturing unit Kilang Bihun Bersatu Sdn Bhd (KBBSB) and KBBSB’s marketing arm.

As of Dec 31, 2016, KBBSB had total liabilities of RM35.3mil. The net book value of assets to be disposed of in KBBSB as at Nov 30, 2016, totalled RM35.7mil. 

EKA said the latest order was not expected to have any material impact on the financial and operational matters of the group as the order was to solely facilitate the group’s scheme of arrangement.